Correlation Between Leverage Shares and GraniteShares

Can any of the company-specific risk be diversified away by investing in both Leverage Shares and GraniteShares at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Leverage Shares and GraniteShares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leverage Shares 5x and GraniteShares 3x Long, you can compare the effects of market volatilities on Leverage Shares and GraniteShares and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Leverage Shares with a short position of GraniteShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and GraniteShares.

Diversification Opportunities for Leverage Shares and GraniteShares

0.82

Correlation Coefficient

Leverage Shares  GraniteShares

Very poor diversification

The 3 months correlation between Leverage and GraniteShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 5x and GraniteShares 3x Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares 3x Long and Leverage Shares is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Leverage Shares 5x are associated (or correlated) with GraniteShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares 3x Long has no effect on the direction of Leverage Shares i.e., Leverage Shares and GraniteShares go up and down completely randomly.

Pair Corralation between Leverage Shares and GraniteShares

Assuming the 90 days trading horizon Leverage Shares is expected to generate 2.78 times less return on investment than GraniteShares. In addition to that, Leverage Shares is 1.06 times more volatile than GraniteShares 3x Long. It trades about 0.05 of its total potential returns per unit of risk. GraniteShares 3x Long is currently generating about 0.14 per unit of volatility. If you would invest  3,021  in GraniteShares 3x Long on September 15, 2024 and sell it today you would earn a total of  3,290  from holding GraniteShares 3x Long or generate 108.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Leverage Shares 5x  vs.  GraniteShares 3x Long

Leverage Shares 5x

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 5x are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leverage Shares unveiled solid returns over the last few months and may actually be approaching a breakup point.

GraniteShares 3x Long

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares 3x Long are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GraniteShares unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leverage Shares and GraniteShares

The main advantage of trading using opposite Leverage Shares and GraniteShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, GraniteShares can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in GraniteShares will offset losses from the drop in GraniteShares' long position.

The idea behind Leverage Shares 5x and GraniteShares 3x Long pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.